DiDi Global Inc (NYSE: DIDI) shares fell 22.18% or $1.73 to close at $6.07 following the ride-hailing company’s announcement that it would delist from the NYSE and seek a listing in Hong Kong, a move prompted by pressure from the Chinese government’s (Cyberspace Administration), which is concerned about data protection.
Although delisting the Beijing-based business on Chinese authorities’ demands is an unusual step, it sheds insight on Beijing’s continued attempts to tightly regulate technology companies. Interestingly, Didi’s situation is rather unique. The Chinese government conducted a cybersecurity examination of the Beijing-based firm and its app within a few days of being listed on the New York Stock Exchange on June 30, 2021.
Regulators reportedly voiced unhappiness with Didi for proceeding with an IPO without resolving underlying cybersecurity risks that the authorities desired to be addressed.
The ride-hailing startup, which launched in 2021, boasts of having 493 million active passengers each year and 41 million daily transactions (average). It is the world’s biggest ride-hailing app and stores a wealth of information on road networks and clients.
Three years ago, the firm began expanding its wings globally. Didi now operates in 14 countries outside of China. Bloomberg reported that China’s Cyberspace Administration had directed Didi to provide the delisting details, which would go through government scrutiny.
Noticeably, SoftBank’s Vision Fund has a stake in Didi of more than 20% in the firm.
The firm said on Friday that it would “immediately” do the needful to delist from the US market (NYSE) and start preparing for a fresh listing in the Hong Kong market. As per a notification by the company, the US shares would be changed to “freely exchangeable shares” on some other global market.
The delisting brings Didi’s brief tenure as a publicly traded firm in the United States to an abrupt conclusion. Investors will be anxiously expecting a flawless transfer of Didi’s shares from the US to Hong Kong. However, detailed information on how Didi intends to achieve the transfer of shares is yet to be revealed.
In a note to clients, Neil Campling, an analyst at Mirabaud Equity Research, wrote, “Regardless of the fact that the US shares remain freely tradable on the HK market, we believe this decision will be the last blow for numerous investors looking to minimize losses. The firm’s shares are owned by a large number of small (retail) investors, whom we assume will be attempting to flee.”
The decision to delist shares from NYSE is expected to keep the stock bearish in the days ahead.
The historical price chart indicates that the stock of Didi is declining after facing resistance at 10. The stock is also trading below its 50-day moving average, while the MACD indicator is declining in the negative zone. Therefore, we are anticipating the stock to remain in a downtrend in the near term.
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